Serbia’s unemployment rate has dropped to a record-low 7.2%, while a declining workforce and faster wage growth are increasing cost pressures for employers, particularly in labour-intensive manufacturing. The country had 2.84 million employed people in the second quarter of 2026, a decrease of 45,800 from a year earlier. The number of unemployed people fell by another 46,800, while the population outside the labour force increased by 61,900, according to official data.
Registered employment also weakened. Total registered employment declined by more than 14,000 year on year during the second quarter, while manufacturing recorded a loss of 17,422 jobs, the largest decline among major sectors.
Wage growth exceeds productivity gains
Labour costs are adding another pressure point for companies. Real wages increased 7.8% year on year in the second quarter, compared with a 4.4% rise in labour productivity, according to the latest Kvartalni monitor. The difference resulted in a 3.3% increase in unit labour costs. Average net salaries reached RSD 121,346 in July, with real net wages increasing 9.2% from a year earlier. The median salary stood at RSD 95,036, highlighting the difference between average earnings and the pay received by a typical employee.
Higher wages support household consumption and living standards, but when wage growth consistently exceeds productivity gains, employers face rising production costs. The issue is particularly relevant to Serbia’s manufacturing base, which has attracted substantial foreign investment through a combination of labour costs, access to the European market, industrial skills and investment incentives.
Manufacturing faces uneven cost exposure
The impact of tighter labour availability and rising wages differs across industries. Higher-productivity sectors such as software, electronics, engineering and advanced manufacturing can accommodate higher salaries more readily because individual employees generate greater economic value. The pressure is greater in textiles, basic assembly, automotive wiring and other labour-intensive manufacturing, where labour accounts for a larger proportion of production costs and margins are generally thinner.
These industries also compete internationally for production assignments. Companies considering locations for additional production capacity can compare Serbia with Hungary, Slovakia, Romania, Turkey, North Africa and lower-cost locations farther east. The changing labour-cost environment is therefore putting pressure on the structure of Serbia’s foreign-investment model.
Automation gains importance for industrial investment
Higher wages can be accompanied by continued industrial competitiveness when productivity increases at a sufficient pace. For manufacturers, this increases the relevance of automation, robotics, digital manufacturing and workforce training. Foreign companies already operating in Serbia may respond by increasing capital investment per employee instead of relying primarily on additional hiring. New projects could likewise require smaller workforces with higher levels of technical expertise.
Such a shift corresponds with Serbia’s broader move toward engineering, electronics, machinery and other higher-value industrial activities rather than predominantly labour-intensive assembly. Regions where employment depends heavily on large labour-intensive factories face a different adjustment as companies change their production structures.
Employment growth becomes less dependent on unemployment
Serbia’s economy expanded 3.8% year on year in the second quarter, while household consumption remained an important contributor to growth. The decline in unemployment therefore needs to be viewed alongside changes in overall labour-force participation. During the quarter, employment and unemployment both decreased while the number of people outside the labour force increased.
For investors, the changing labour-market structure places greater emphasis on productivity, automation, engineering skills, infrastructure and higher value added per employee. The 7.2% unemployment rate accompanies a labour market in which the number of available workers is becoming a more significant constraint for industrial employers, while rising labour costs increase the importance of generating more output and value from each employee.
